*2476 The petitioner's decedent was one of the beneficiaries of a trust created by the last will and testament of her uncle. The trustees of said trust received from time to time stock dividends on certain stocks held by the trust. Said stock dividends were subsequently, in a suit brought to construe said will, adjudged by the court to be income of the trust which should have been distributed to the beneficiaries when received by the trustees. In 1918 shares of stock representing one-half of said stock dividends were conveyed by the trustees to the petitioner's decedent pursuant to the order of said court and they were subsequently sold by her. Held, gain or loss should be computed from the date said stock dividends were received by said trustees.
*105 These proceedings, which were duly consolidated for hearing and decision, are for the redetermination of deficiencies in income taxes asserted by the respondent in the amounts of $2,964.51 for 1923, $27,295.37 for 1924, and $1,323.93 for 1925. The issue is as to the basis for computing gain or loss*2477 from the sale of certain shares of stock.
FINDINGS OF FACT.
The petitioner is and has been since January 21, 1927, the duly appointed, qualified and acting executor of the estate of Fannie H. Higbee.
William R. Pye, a resident of St. Louis, Mo., died in the year 1889, leaving a last will and testament which provided, among other things, that:
I do hereby convey, transfer and assign, unto Benjamin G. Chapman and Warner M. Hopkins, of the City of St. Louis, State of Missouri, all real estate that I may die possessed of (more particularly set forth in an inventory hereto *106 annexed), consisting of business and resident property in the City of St. Louis, Missouri, and leasehold therein and lands in Colorado and also - all other real estate that I may hereafter acquire or become possessed of; also all personal property and effects now belonging to me or hereafter acquired by me of whatever character embracing moneys on hand or that may be due or becoming due to me; all Bonds or Stocks of Corporations, all notes of hand or moneys due me and mortgages or Deeds of Trust securing same, to be held by them, the said Benjamin G. Chapman and Warner M. Hopkins - In Trust - however*2478 for the sole use and exclusive benefit and disposal of my two nieces, sisters of the said Warner M. Hopkins, to-wit; Fannie R. Hopkins and her sister Louisa H. Chapman, wife of the said Benjamin G. Chapman share and share alike, subject, however, to the following described bequests and conditions. The said trustees, B. G. Chapman and W. M. Hopkins, or their successors, or the surviving trustee are hereby authorized, with the written consent of the aforesaid beneficiaries, Fannie R. and Lulu H. or the surviving one, to sell, convey or dispose of any or all of the real estate or personal property hereby conveyed to them, and invest the proceeds of said sale in other property as they may elect, for the sole use and disposal of the said beneficiaries, their heirs and assigns.
1st. It is hereby conditioned and provided that one-half of the real estate and personal property, (except household effects), hereby bequeathed to and for the use of the said Fannie R. Hopkins, or the equivalent thereof in money value, shall be conveyed, transferred and bequeathed at her death by her will and testament, or in default of such conveyance by the said Fannie R. Hopkins, her administrator or executor, *2479 shall convey to the "St. Louis Bethel Association of the City of St. Louis, Missouri", a corporation of said city, for the purpose of erecting in said city a house for public religious christian worship, as the trustee or directors of said Bethel Association may determine or the said Fannie R. Hopkins may appropriate such request to any other charitable purpose that she may select or determine.
Fannie R. Hopkins, named in the last will and testament, and Fannie H. Higbee, above referred to, were one and the same person.
The testator, William R. Pye, by his last will and testament also provided for certain specific bequests and gave (1) to his sister, Clarissa L. Wheeler, $1,000 per annum during her life; (2) to his brother, Edward R. Pye, $500 per annum during his life; (3) to Elizabeth Edgar, $600 per annum during her life; and (4) to Lizzie C. Lodwich during her life interest at 6 per cent on $4,000, or so much thereof as she should fail to recover in a certain suit then pending.
The estate of William R. Pye was administered by the executors of his last will and testament, and upon the conclusion of the administration the assets mentioned in the paragraph of the will above*2480 set forth were turned over to the trustees named therein. Included in said assets were 150 shares of what was then known as the American Arithmometer Co. Subsequently the trustees bought 18 additional shares of said stock. From time to time the American Arithmometer Co., the name of which was subsequently changed to Burroughs Adding Machine Co., declared stock dividends and the shares of stock representing said dividends were delivered to *107 said trustees as follows: On or about July 15, 1898, 168 shares; on or about January 16, 1905, 3,024 shares; on or about January 16, 1917, 6,720 shares, a total of 9,912 shares. The said trustees continued to hold all of the trust estate, including said 9,912 shares of the capital stock of the Burroughs Adding Machine Co. received as aforesaid, and to pay the annuities provided by the last will and testament of William R. Pye until the year 1918. In 1918 the said Fannie H. Higbee and Louisa H. Chapman claimed that they were entitled to the said 9,912 shares of the capital stock of the Burroughs Adding Machine Co. representing said stock dividends and the said Fannie H. Higbee further claimed that the provision of the last will and*2481 testament of William R. Pye by which she was required to convey "one-half of the real estate and personal property * * * hereby bequeathed to and for the use of the said Fannie R. Hopkins, or the equivalent thereof in money value" at her death to charity only required her to make such gift of the equivalent in money value of one-half of William R. Pye's estate at the time of his death and not one-half of the value of said estate at the time of the death of Fannie H. Higbee. On the other hand, the St. Louis Bethel Association mentioned in the last will and testament of William R. Pye as the object of such bequest, claimed that Fannie H. Higbee was required to convey to charity the equivalent in money value of one-half of that portion of the trust created for the benefit of Fannie H. Higbee, such money value to be determined as of the date of Fannie H. Higbee's death.
In view of these claims and demands of Louisa H. Chapman and Fannie H. Higbee, said trustees filed in the Circuit Court of the city of St. Louis in the June term of 1918, a certain suit wherein they, the trustees, were plaintiffs, and Fannie H. Higbee, Louisa H. Chapman, Elizabeth Edgar and William B. Edgar, her husband, *2482 and the St. Louis Bethel Association were defendants, in which the plaintiffs and the trustees sought to have the court construe the last will and testament of the said William R. Pye and to advise and instruct them, the said trustees, as to the proper disposition of the said 9,912 shares of the capital stock of the Burroughs Adding Machine Co. representing the said stock dividends. Thereafter, on August 7, 1918, the Circuit Court of the city of St. Louis entered a decree in said cause, which decree is in part as follows:
Wherefore in consideration of the premises the court is of the opinion (a) that under the proper construction of said will of William R. Pye deceased that it was the intention of the said testator that the stock dividends described in the plaintiff's petition and these findings having been declared out of the accumulated earnings of the Company should be a part of the income of the said trust estate and as such should have been paid to the said Louisa H. Chapman and Fannie R. Higbee as they were received by the said trustees.
*108 (b) That the aforesaid trust estate was given to the plaintiffs as trustees and their successors to be held by them in trust*2483 for the benefit equally of his nieces Louisa H. Chapman and Fannie H. Higbee with the powers to said trustees set forth in said will; without any limitations as to the right and interest of Louisa H. Chapman, in and to her share thereof but with the following provision with reference to the interest and right of Fannie H. Higbee in her share, to-wit: that Fannie H. Higbee should convey, transfer, or bequeath, or if she should die without so doing that her administrator or executor should convey to defendant St. Louis Bethel Association of St. Louis, Missouri, one-half of the principal or corpus of said trust estate real or personal (except household effects) or its equivalent in value in money estimated as of the time of the death of said testator to the St. Louis Bethel Association of the City of St. Louis, Missouri, defendant herein, for the purpose of erecting by it in said city a house for public religious christian worship as the trustees of said association may determine, provided, however, that said Fannie H. Higbee should have the power to annul said provision for the St. Louis Bethel Association and appropriate such bequest to any other charitable purpose she may select and*2484 determine, and the court is of the opinion that Fannie H. Higbee has the valid power and right to appropriate said one-half of the principal of said trust estate or its equivalent in value in money, estimated as of the time of the death of said testator either to said Bethel Association for the purpose of erecting a church as aforesaid or to any other charitable purpose she may select by transfer in her lifetime or by her will at her death and that in event of her death without having made such appropriation to such other valid charitable purpose that it will be the duty of the administrator or executor of said Fannie H. Higbee to transfer said property or its equivalent in value in money estimated as of the time of the death of said testator to said Bethel Association for the purpose afresaid and that in the event she shall appropriate said trust property to any other charitable purpose which she may select it will be the duty of the trustees or their successors to transfer said trust property to such person or persons in such manner and form as may be necessary and appropriate to carry out her purpose.
The court therefore in consideration of the premises does order, adjudge and*2485 decree that the plaintiffs as trustees aforesaid transfer and assign in equal parts to defendants, Louisa H. Chapman and Fannie H. Higbee the aforesaid nine thousand nine hundred and twelve (9912) shares of the stock of the Burroughs Adding Machine Company to be owned and held as their absolute property * * *.
Pursuant to said decree the said trustees on August 7, 1918, transferred and delivered to Fannie H. Higbee a certificate for 4,956 shares of the capital stock of the Burroughs Adding Machine Co., which represented her portion of said stock dividends. The shares of stock so received by Fannie H. Higbee, together with shares of stock representing subsequent stock dividends received thereon, were held by her until the years 1923, 1924, and 1925. In the year 1923 the said Fannie H. Higbee sold 689 shares of said capital stock of the Burroughs Adding Machine Co. for $86,029.22; in the year 1924 she sold 7,000 shares of said stock for $840,500, and in the year 1925 she sold 616 shares of said stock for $58,434.16.
*109 The said Fannie H. Higbee in her returns of income for the years 1923, 1924, and 1925, took, as the basis for computing gain or loss on the sale of said*2486 shares of the capital stock of the Burroughs Adding Machine Co., the value thereof at the time they were actually received by her. The respondent, upon audit of the returns, determined that the proper basis for computing such gain or loss should be the value of said shares at the time they were received by the trustees of said trust, and that there are deficiencies in tax as above set forth.
OPINION.
MARQUETTE: In view of the pleadings herein and the admissions made by counsel at the hearing, the only controversy between the parties to this proceeding is as to the date that Fannie H. Higbee acquired, within the meaning of the Revenue Acts of 1921 and 1924, the 4,956 shares of the capital stock of the Burroughs Adding Machine Co. that were distributed to her on August 7, 1918, pursuant to the decree of the Circuit Court of the city of St. Louis.
The petitioner contends that Fannie H. Higbee acquired the stock on the date of distribution, while the respondent takes the position that she acquired it, within the meaning of the taxing statutes, on the several dates it was received by the trustees of the trust created by the will of William R. Pye. The parties appear to be in*2487 accord as to the basic values to be used in computing profit and loss on the subsequent sales of the stock, depending on the date of acquisition by Fannie H. Higbee, and the petitioner concedes that if the position of the respondent as to the date of acquisition is well taken, the deficiencies determined by him are correct.
The petitioner relies on the cases of ; ; ; and , in which it was held that a legatee under a will acquires personal property within the meaning of the Revenue Acts of 1918 and 1921 when such property is distributed by the executor and that gain or loss on the subsequent sale of the property should be computed from the date of distribution. The applicable provision of the Revenue Act of 1924 is identical with the provisions of the Revenue Acts of 1918 and 1921 and the same meaning must be given to the word "acquired" in the Act of 1924 as in the prior acts.
We are of opinion that the contention of the petitioner that Fannie H. Higbee*2488 acquired the shares of stock in question when they were actually distributed to her by the trustees can not be sustained in view of the recent decision of the Supreme Court of the United States in . In that case the petitioner's father died testate May 20, 1918. The surrogate's *110 court at Rochester, N.Y., entered a final decree April 19, 1920, pursuant to which certain stocks were distributed to the petitioner as one of the residuary legatees. For his income-tax returns he computed profit or loss on each sale by comparing the selling price of the stock with its value at the date of the decree of distribution and paid the amounts so determined. The Commissioner held that the values of the stock at the date of the testator's death should be taken for the calculation of income, and on that basis assessed for each year an additional tax, which petitioner paid under protest. The petitioner brought an action in the District Court for the Western District of New York to recover the amounts so exacted. That court gave judgment for him. The Circuit Court of Appeals reversed the judgment of the District Court. The case was taken*2489 to the Supreme Court of the United States on writ of certiorari and that court, affirming the judgment of the Circuit Court of Appeals, said in part:
Upon the death of the owner, title to his real estate passes to his heirs or devisees. A different rule applies to personal property. Title to it does not vest at once in heirs or legatees. . But immediately upon the death of the owner there vests in each of them the right to his distributive share of so much as shall remain after proper administration and the right to have it delivered upon entry of the decree of distribution. ; ; . Upon acceptance of the trust there vests in the administrators or executors as of the date of the death, title to all personal property belonging to the estate; it is taken, not for themselves, but in the right of others for the proper administration of the estate and for distribution of the residue. The decree of distribution confers no new right; it merely identifies the property remaining, *2490 evidences right of possession in the heirs or legatees and requires the administrators or executors to deliver it to them. The legal title so given relates back to the date of the death. ; ; .
Petitioner's right later to have his share of the residue vested immediately upon testator's death. At that time petitioner became enriched by its worth which was directly related to and would increase or decline correspondingly with the value of the property. And, notwithstanding the postponement of transfer of the legal title to him, Congress unquestionably had power and reasonably might fix value at the time title passed from the decedent as the basis for determining gain or loss upon the sale of the right or of the property before or after the decree of distribution. And we think that in substance it would not be inconsistent with the rules of law governing the descent and distribution of real and personal property of decedents to construe the words in question to mean the date of death.
The decree of the Circuit Court*2491 for the City of St. Louis created no new property right. It merely declared and defined rights that then and had theretofore existed, rights that belonged to Fannie H. Higbee, which were vested in her by the will of her uncle, William *111 R. Pye, and which became effective, in so far as the stock dividends involved herein were concerned, when the dividends were received by the trustees. Under the construction placed upon the will by the Circuit Court, Fannie H. Higbee had, as a beneficiary of the trust created by the will, the right to have one-half of the stock dividends conveyed to her as and when they were paid to the trustees. That she did not assert her right or attempt to enforce it until later, and did not actually receive the stock until 1918, does not alter the situation. The right nevertheless existed. In view of the decision of the Supreme Court of the United States in , we are constrained to hold that Fannie H. Higbee acquired her share of the stock dividends in question, within the meaning of the Revenue Acts of 1921 and 1924, at the dates they were received by the trustees.
Reviewed by the Board.
Judgment*2492 will be entered for the respondent.